Rants and raves about the mess of higher education in the United States.

Thursday, September 6, 2018

College Moves From Loans To Income Sharing (Plus Loans)

By Professor Doom

The student loan
scam has destroyed many lives in this country, and people are finally starting
to balk at letting their kids take out ridiculously huge loans, particularly
for degrees which offer little hope of paying back the loan…these days, that’s
most degrees.

Eager to snatch
up more students, and knowing that loans just aren’t selling like they used to,
some schools are now getting students into an “income sharing” agreement in
exchange for their tuition. Instead of a loan, the student agrees to pay a
portion of his income after he gets his degree, for a set number of years after
graduation.

Now, considering
how ruthless so many of our schools have been when it comes to exploiting kids,
I’m naturally wary of anything they have to say. That said, this new agreement
makes considerable sense. Part of why the student loan scam was so horrific was
the schools had no skin in the game: no matter how fraudulent the “education,”
the schools got their loot, while the students got debt.

Norwich’s program is starting out on a small scale, mainly
for students who do not have access to other types of loans or those who are
taking longer than the traditional eight semesters to finish their degree.

And…there
goes their credibility. They’re only offering this to students who’ve basically
run out of loan money, in an attempt to squeeze just a few more dollars out of
them. So, after the schoolhas grabbed
all the low hanging fruit of studentloan money, then and only then will the school return to its mission of
helping humanity. Still, this isn’t all bad:

Those
touting the programs say they give colleges greater incentive to help students
find high-earning jobs after graduation, because a higher salary means the
school may recoup its investment in a shorter period of time.

For
some students, income share agreements are seen as less risky, especially if they
end up in a lower-paying job or struggle to find work after graduation. While
students are unemployed or earning below a certain threshold they don’t have to
pay anything back.

Overall, this still is a good idea, but I
wish they would offer it to everyone, from their very first day on campus.
Their cherry-picking worries me that they’re just simply looking for more
revenue, rather than helping humanity through education and research.

The very clear dark side here is higher
education was never supposed to be about raking in money, either for the school
or for the students. This type of program makes sense for jobs-training
degrees…but what of the liberal arts, or frankly all sorts of degrees which are
far more about knowledge than job skills? These have no choice but to fall to
the wayside, although, granted, this is happening in schools not offering these types of programs anyway.

The terms can vary,
notably the length of the agreement and the salary percentage. Hoyler is
currently paying back 8 percent of his income. Since future salary is generally
unpredictable, it can be difficult to forecast how much a student will pay back
over time, although most agreements do place a cap on the amount paid back.

Again, in principle, the idea makes a
great deal of sense, but I still see problems with making this work outside of
very particular jobs training programs. Suppose a student comes in to be a
petroleum engineer, but washes out after 2 years (and trust me, this happens
quite often)? Can he switch over to gender studies, and then pay back the
tuition by giving up a share of his income as a janitor?

In 2015, Oakton, Virginia-based Vemo Education began working
with accredited colleges and universities. The company now works with nearly 30
public and private colleges and universities across the country, including
Norwich University.

At
least some schools are now heading the right direction again. Knowing that they
will only do so once the student loan money runs out, we can speed up this
process in an obvious way: end the student loan scam.